Iowa Electronic Markets
Henry B. Tippie College of Business
W283 PBB
University of Iowa
Iowa City, IA 52240
iem@uiowa.edu
IEM PROSPECTUS: 1994 U.S. CONGRESSIONAL MARKETS
At noon (C.D.T.) Friday, June 10, 1994, the Iowa Electronic Market
(IEM) will open trading in markets based on the composition of both
houses of congress following the November 1994 election. There will
be four markets: majority markets for the House of Representatives
and the Senate and share of seats markets for the House and the
Senate. This document describes these four markets and should be
viewed as a supplement to the IEM Trader's Manual. Except as
specified in this supplement, trading rules for the 1994 U.S.
Congressional Markets are the same as other markets listed in the
IEM Trader's Manual.
Payoffs in the House Majority Market and the Senate Majority Market
will be determined by which party, if any, wins an absolute
majority of seats (218 or more in the House and 51 or more in the
Senate). In the House Majority Market, contracts for the party
which wins a majority of the seats in the next House of
Representatives will earn $1.00 each and all other contracts will
expire worthless. In the event that neither party wins 218 seats
or more, the contracts on this outcome (the "neither" contract)
will earn 1 dollar each. The Senate Majority Market will work
similarly. Contracts for the party which wins a majority of seats
in the next U.S. Senate will earn $1.00 each and all other
contracts will expire worthless. There will also be "neither"
contracts in this market which will pay $1.00 each if neither party
wins 51 seats or more.
Payoffs in the House Seats Market and the Senate Seats Market will
be determined by the share of seats each party wins. In each
market, contracts will be paid $1 times the share of the seats a
party wins. Thus, if the Democrats control 55 seats in the next
Senate, their contracts in the Senate Seats Market will be paid 55
cents each.
CONTRACTS -- The contracts traded are:
HOUSE MAJORITY MARKET
Code Contract Liquidation Value
HM.DEM $1 if Democrats control 218 or more seats in the next
House
HM.REP $1 if Republicans control 218 or more seats in the next
House
HM.NONE $1 if neither Dems. or Reps. control 218 or more seats
in the next House
SENATE MAJORITY MARKET
Code Contract Liquidation Value
SM.DEM $1 if Democrats control 51 or more seats in the next
Senate
SM.REP $1 if Republicans control 51 or more seats in the next
Senate
SM.NONE $1 if neither Dems. or Reps. control 51 or more seats
in the next Senate
HOUSE SEATS MARKET
Code Contract Liquidation Value
HS.DEM $1 * Democrats share of seats in the next House
HS.REP $1 * Republicans share of seats in the next House
HS.OTH $1 * all others share of seats in the next House
SENATE SEATS MARKET
Code Contract Liquidation Value
SS.DEM $1 * Democrats share of seats in the next Senate
SS.REP $1 * Republicans share of seats in the next Senate
SS.OTH $1 * all others share of seats in the next Senate
All four of these markets will close at 11:59 pm (C.S.T.) on
election day, Tuesday, November 9, 1994. As soon thereafter as
official election returns make it possible to determine the
composition of the next House and Senate, liquidation values will
be declared and funds invested in the market will be distributed to
the cash accounts of the market participants. Participants may
also withdraw funds in their cash account on the 15th of any month,
with 5 days' advance notice (in writing).
UNIT PORTFOLIOS -- Unit portfolios, consisting of one of each of
the three contracts listed in the House Majority Market, can be
purchased from or sold to the IEM system at any time. The price of
each unit portfolio is $1.00. Use the "Purchase" option from the
TRADING MENU and enter "HM.1$" as the name of the contract to buy
unit portfolios. Use the "Sell" option from the TRADING MENU, with
"HM.1$" as the contract name, to sell unit portfolios. Purchases
will be charged to your cash account and sales will be credited to
your cash account.
Unit portfolios may also be purchased or sold for $1.00 in the
other three markets. Use "SM.1$" as the contract name in the
Senate Majority Market, "HS.1$ in the House Seats Market, and
"SS.1$" in the Senate Seats Market.
Unit portfolios may also be purchased from and sold to other
traders at current market prices. Use the Purchase and Sell
options as above, but enter "HM.MKT" as the contract name in the
House Majority Market, "SM.MKT" as the contract name in the Senate
Majority Market, "HS.MKT" as the contract name in the House Seats
Market, and "SS.MKT" as the contract name in the Senate Seats
Market. The price charged for such purchases will be determined as
the sum of the current ask prices, and the price paid for such
sales will be the sum of current bid prices. Should no
corresponding bid or ask be present for one of the candidates,
contracts in that candidate will be excluded from the portfolio;
otherwise the number of contracts purchased or sold will be the
same in each candidate.
MARKET ACCESS -- Any trader who registers to participate in the
Congressional Markets will automatically be given access rights to
all other political markets. Access is achieved via the "Market
Selection" option on the Login, Market and other Menus. Funds in
a trader's cash account are fungible across all markets so new
investment deposits are not required. Additional investments up to
the maximum of $500 can be made at any time, however, and with a
five day advance notice.